Imported from previous forum
Hi guys,
Is it possible to implement a restriction condition on number of orders per minute\second on the FIX Bridge? So for example, say client X has an internal restriction that says for futures instrument X do not place no more then 50 orders per second, but for one reason or another that logic fails and the client submits more then 50 lots per second to the broker, is the broker able to setup a order restriction (agreed with client) to stop that order from being sent to the market? So effectively the order can either be rejected or only the 50 lots executed and anything above submitted gets rejected.
I would be very surprised if this was not possible……
Look forward to hearing from you
[ original email was from Greg Wood - greg.wood@credit-suisse.com ]
Hi Kofil,
The recent Futures Industry Association market access white paper recommended that such a “throttle” be implemented for automated trading strategies along with other types of pre-trade risk management. In the white paper it actually puts the onus on the trading firm, but general concensus is that brokers and exchanges should look to provide this functionality as well in order to protect against an algo that gets stuck in a loop and keeps sending orders.
The throttle should work against the number of messages received per second and reject anything that breaches the limit. That’s the theory, it would be interesting to see how many brokers and exchanges have implemented or plan to implement this in the near future.
However, throttling is typically concerned with messages per second, as opposed to the payload of the message. Most low latency pre-trade risk checks will look at the cumulative effect of a futures order in terms of daily net position, so if an algo keeps sending orders to buy 50 lots and the trading firm has a daily long limit of 200 contracts, then the 2nd, 3rd and 4th order would be accepted and the 5th order rejected (assuming no other orders working or previously traded). So that means that you could potentially trade 200 contracts before the position limit kicks in. That’s why it is important to agree realistic intraday position limits with your broker and treat them as a speed bump to catch anything before it gets too far out of hand.
What you’re asking for is a combination of a position check and throttle by saying you can send no more than 50 contracts per second. That’s definitely possible, but it will introduce additional logic, and hence latency. This is not something that we intend to do just at the moment - not because of the complexity but because we feel that the combination of the intraday position limit and a throttle should catch the worst of cases.
I would be interested to hear what other brokers and vendors say about hybrid pre-trade limit checking.
Regards,
- Greg
Hi guys,
Is it possible to implement a restriction condition on number of orders per minute\second on the FIX Bridge? So for example, say client X has an internal restriction that says for futures instrument X do not place no more then 50 orders per second, but for one reason or another that logic fails and the client submits more then 50 lots per second to the broker, is the broker able to setup a order restriction (agreed with client) to stop that order from being sent to the market? So effectively the order can either be rejected or only the 50 lots executed and anything above submitted gets rejected.
I would be very surprised if this was not possible……Look forward to hearing from you
Message level throttling has been added to FIX 5.0 SP2 very recently as Extension Pack 116 (http://www.fixprotocol.org/documents/4992/FIX%20Protocol%20Gap%20Analysis%20-%20Message%20Throttle%20v%200.13.doc). Risk limits have also been added to FIX 5.0 SP2 as EP105 (http://www.fixprotocol.org/documents/4723/FIX%20Gap%20Analysis%20Parties%20Ref%20Data%20Extensions%20Rev%200.10_TRACKCHANGES.doc) and will be further extended by an upcoming EP (http://www.fixprotocol.org/documents/5307/FIX%20Protocol%20Gap%20Analysis%20-%20Risk%20Limit%20Extensions%20v0.2.doc).
Technical and functional limits were distinguished on purpose, i.e. throttles such as messages per second are a parameter to avoid technical complications whereas risk limits are parameters to prevent too much exposure in business terms.
There is a connection between the two in the latest proposal extending the risk limits as you can tie it to risk limit or warning level actions which take their valid values from the new throttle action field, i.e. you can convey that the rate of order entry will be reduced above a certain business limit.
However, I do not think that order quantities per second are a good measure to reduce risk. It says nothing about fill rates. Have a look at the extensions to see if they can cover your needs.
Regards,
Hanno.
Hi guys,
Is it possible to implement a restriction condition on number of orders per minute\second on the FIX Bridge? So for example, say client X has an internal restriction that says for futures instrument X do not place no more then 50 orders per second, but for one reason or another that logic fails and the client submits more then 50 lots per second to the broker, is the broker able to setup a order restriction (agreed with client) to stop that order from being sent to the market? So effectively the order can either be rejected or only the 50 lots executed and anything above submitted gets rejected.
I would be very surprised if this was not possible……Look forward to hearing from you